Carrianna Group Holdings (HKG:126) Will Be Hoping To Turn Its Returns On Capital Around

If you're looking at a mature business that's past the growth phase, what are some of the underlying trends that pop up? When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. So after glancing at the trends within Carrianna Group Holdings (HKG:126), we weren't too hopeful.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Carrianna Group Holdings is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.0077 = HK$28m ÷ (HK$5.6b - HK$2.0b) (Based on the trailing twelve months to March 2025).

Thus, Carrianna Group Holdings has an ROCE of 0.8%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 8.3%.

View our latest analysis for Carrianna Group Holdings

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Carrianna Group Holdings' past further, check out this free graph covering Carrianna Group Holdings' past earnings, revenue and cash flow.

What Does the ROCE Trend For Carrianna Group Holdings Tell Us?

We are a bit anxious about the trends of ROCE at Carrianna Group Holdings. To be more specific, today's ROCE was 3.0% five years ago but has since fallen to 0.8%. What's equally concerning is that the amount of capital deployed in the business has shrunk by 22% over that same period. When you see both ROCE and capital employed diminishing, it can often be a sign of a mature and shrinking business that might be in structural decline. If these underlying trends continue, we wouldn't be too optimistic going forward.

What We Can Learn From Carrianna Group Holdings' ROCE

To see Carrianna Group Holdings reducing the capital employed in the business in tandem with diminishing returns, is concerning. Long term shareholders who've owned the stock over the last five years have experienced a 66% depreciation in their investment, so it appears the market might not like these trends either. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.

One more thing: We've identified 4 warning signs with Carrianna Group Holdings (at least 2 which are significant) , and understanding them would certainly be useful.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.